Josh Charlson: Hi. I'm Josh Charlson. I am a fund analyst here at Morningstar, and joining me today is Chris Sharpe. Chris is a portfolio manager in the Asset Allocation Group at Fidelity, and he's a portfolio manager on the target-date funds at Fidelity, which includes the Fidelity Freedom Funds, the Fidelity Advisor Freedom Funds, and the Fidelity Freedom Index Funds.

Thanks for joining us today.

Chris Sharpe: Thanks for having me.

Charlson: I wanted to ask you about one of the debates in the target-date industry, and that's the so-called "to" versus "through" debate, which really centers on how the asset allocation should evolve as investors get close to retirement. [The debate is] whether there should be an assumption--that some providers have--that investors might be withdrawing their assets [upon the specific target date], and [this strategy] requires a very conservative allocation to stocks, versus the idea that they will continue to be investing over time, thus requiring a larger investment in stocks and the need for capital appreciation. Where does Fidelity stand on that debate, and how does your glide path fit into that?

Sharpe: It's a great question. So going back to 1996, we have always built this as a retirement-income vehicle, and like any investment decision it's important to understand how people will make decisions around different timelines and what they do. But we've always represented this as a retirement-income vehicle, and so when you think about it, there is 40 to 45 years of accumulation and 20 to 25 to 30 years of distribution.

In terms of the "to" versus "through" debate, it's very much almost out of context in terms of what we're trying to do. We are cognizant of the accumulation and the distribution. So that specific transition point is important, obviously, in terms of the individual investor. But in terms of what we have as a product and strategy here, it's about retirement income. And so, in terms of how we represent the product, it's about understanding that this strategy will help you accumulate and then distribute your assets. It's understanding the intent of the strategy and making sure that the users are using it appropriately.

Charlson: Another thing I want to ask you about has to do more with portfolio construction and manager selection. Our analyst who covers the Fidelity Freedom Funds, Chris Davis, has been critical sometimes of the fact that investors can't get access to managers like Will Danoff, who manages Fidelity Contrafund, or other managers maybe who are prominent in the industry, because of the approach you take there. Could you talk a little bit about your philosophy there, and, for instance, why Will Danoff is not represented in the portfolio?

Sharpe: I think it has to go back to that original concept or thread that we've been talking about in the sense of what we're trying to do is generate retirement income, and when we think about that, what generates that is: first and foremost, contributions; then it's the asset allocation; then it's the construction within the asset classes; and then it's the ultimate manager selection and strategies that we determine. So, it's going through that sort of structure that we are very cognizant of the building blocks. We want to make sure that we have the right asset classes. We want to make sure we have the right investment exposures. We want to make sure that we have the right strategies within those investment exposures.

Something we've been doing historically over, say, the past five years are built something that we call series funds which are dedicated funds for strictly the Freedom Funds. So, their strategy is that with our 40 Act mutual fund or our retail mutual fund, they are available on [Morningstar.com], but they are not available for purchase. And we go through that construction process working with our management to come up with a mutual fund that's dedicated to Freedom Funds.

It's about that building block, and over 75% of our assets right now are currently in these very specific, targeted building blocks. Why we're doing that is that we're trying to represent the asset classes, represent the strategies that build up to that asset-class exposure to bring it back up to the objective.

So, in terms of the individual managers, obviously that's very important, but we need to make sure that we're getting the investment exposures that we have. And we'll continue to evolve on these dedicated, or Series Fund, structures that you see within the Freedom Funds.